A survey suggests the need for strategic investments in re-designing anti money laundering (AML) compliance programmes in banking and financial services sectors in Bangladesh.
The Deloitte Touche Tohmatsu India LLP (DTTILLP) released the “South Asia Anti Money Laundering Preparedness Survey report 2020” on Tuesday.
Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax, and related services.
The survey was conducted by Deloitte with leading banks and financial institutions in India, Sri Lanka, and Bangladesh earlier this year to understand how banks and financial institutes are dealing with the current regulatory environment and to assess how new regulations are impacting the way they work and if their AML programmes were compliant with regulatory requirements.
In Bangladesh, about 71 percent respondents indicated that their AML programmes were compliant with regulatory requirements.
Yet they also felt that staying compliant in the future would be a key challenge and listed some top challenges that include – insufficient or outdated technology to manage AML compliance, increased pressure to comply with multi-jurisdictional, insufficient numbers of adequately trained staff, and meeting increased regulatory expectations.
“Historically, AML programmes have been incident-driven with lean teams to manage response to events, or changes in regulatory developments. But that is no longer adequate today.
With increased regulatory scrutiny, and expectations being “If you could have known, then you should have known”, banks need to move to a proactive approach to demonstrate their compliance to avoid fines, rather than rely on the traditional reactive approach,” said KV Karthik, Partner, Forensic – Financial Advisory, DTTILLP.
“This calls for investments in an integrated enterprise wide approach to manage compliance and prevent failures. Such an approach that provides a comprehensive view of customers and transactions can make it difficult for criminals to exploit gaps between business systems, databases and countries.”
Overall, survey respondents also highlighted technology-related challenges such as lack of information while investigating alerts, data accuracy and unstructured data, limited integration with core banking systems, and incomplete coverage of all products and processes in the area of transactions monitoring.
This lack of technological maturity, and data governance appears to have had a cascading impact on every aspect of the AML programme.
In the area of sanctions screening, over 60 percent respondents indicated that they were struggling with issues posed by limited data structure and integration with core banking systems.
Too many false positives, and limited automation pertaining to the updation of regulatory lists and sanctions lists, emerged as other major issues amongst the respondents.
In the area of trade-based money laundering, 88 percent respondents indicated screening trade finance transactions against internal lists, regulatory lists, and sanctions lists.
The respondents also pointed at challenges such as identifying hidden relationships between trade partners and ports, estimating pricing and invoicing of goods, and unavailability of a single automated system that can combine all screening data.
“In the past, banks have made discretionary investments in technology to meet certain immediate concerns around AML compliance. These have created issues pertaining to the availability and quality of data, systems working in a siloed manner, and inherent module based limitations, leading to significant reliance on manual processes to close gaps in compliance,” said Karthik.
“Regulators today expect banks to have a consolidated view of customer transactions across businesses and jurisdictions, to identify any unusual transactions and behaviours, or potential sanctions violations. The current technology frameworks may pose a challenge to doing that and banks need to take a strategic and longer term view of technology investments”.